Opalesque Industry Update - Thirteen Lyxor Strategy Indices out of 14 ended the month
in positive territory, led by the Fixed Income Arbitrage (+1.2%),
the Lyxor Long/Short Credit Arbitrage Index (+1%) and the L/S
Equity - Market Neutral Index (+0.9%). The Lyxor Hedge Fund
Index posted a positive performance at 0.4% in November 2012
(+2% in 2012 to date).

The rising uncertainty related to the U.S. fiscal cliff issue
focused investors’ attention in November. Risky assets started
the month on the wrong foot amid mounting fears over policy
issues but rumors of progress on the fiscal cliff negotiations,
rising expectations of a solution for Greece (that materialized on
27 November) and to a lesser extent the smooth leadership
transition in China helped equity markets recover the lost
ground. Hedge fund managers navigated well in this context.

Managers in the fixed-income space continued to perform well,
amid further gains in sovereign and credit bonds. The Lyxor
Fixed Income Arbitrage and L/S Credit Arbitrage indices were
up respectively 1.2% and 1% in November. Managers
succeeded in adding value, as dispersion increased, creating
trading opportunities (US MBS, European sovereign debt…).
Also, the overall volatility backdrop remained supportive. Yearto-
date, these two strategies clearly outperform their peers, the
Fixed Income Index yielding 10.1%, and the Credit Arbitrage
Index 9.2%. The Lyxor Convertible bond Arbitrage Index also
performed nicely (+0.3 %) mainly driven by specific stories, and
is up 3.9 % year-to-date.

Within the event driven strategies, funds focused on merger
arbitrage (Lyxor Merger Arbitrage Index) returned 0.7% over the
month. Positive drivers included the improvement in business
confidence and a sizeable increase in merger activity - the
number of deals was up roughly 40% in the U.S. over the past
three months. The Lyxor Distressed Securities index and the
Lyxor Special Situations Index were almost flat this month (+
0.1%).

L/S equity strategies also performed well this month. Variable
bias managers who opportunistically increased net equity
exposure and were able to generate alpha on stock selection
started to catch up on underperformance. The L/S Equity
Variable bias Index gained 0.9% but is still down -0.6% year-todate.
Other strategies posted positive performances too: Long
bias (+0.5%), Statistical Arbitrage (+0.7%), Market Neutral
(+0.9%).

The economic news flow confirmed the encouraging data seen
during October, with growing signs that the global industrial
cycle has bottomed, and that activity is strengthening in the
U.S. and in Asia. Despite these receding economic risks and
the ample liquidity provided by Central Banks, CTA and Global
Macro managers as a whole recorded disappointing
performances. The lack of persistent trends and elevated
political uncertainties continued to undermine performance. The
Lyxor CTA Short Term lost -1.8% and CTA Long Term Indices
was almost flat (+0.1%) during the period under review. The
Lyxor Global Macro Index appreciated (+0.5%) thanks to
rewarding bets on commodities and currencies at the end of
the month.

“We note a broadening of strategies participating in rising
markets. The top decile of funds on the Lyxor MAP are all up in
double digit territory, and they belong to six different strategies.
This is a remarkable change compared to last year, when
computer-driven systems dominated the rankings.” says Stefan
Keller, Head of Managed Account Platform Research & External
Relations at Lyxor AM.